draining development.pdf - Khazar University

Governance and Illicit Flows 57cultivation of plants associated with the manufacture of narcotics. Thefinancial flows from these activities are likely to be directly controlled bypolitical actors and may provide the funds for sustaining the conflict.The only type of capital flight that is likely to emanate directly from thedecisions of economic actors is the obvious one of attempting to escapedestruction or appropriation. But if individuals try to move their assetsout of a war zone to avoid expropriation, it would be unhelpful to characterizethese as illicit.Of most concern in fragile societies are the flows organized by politicalactors, as these are bound to be connected with ongoing conflicts insome way. In the case of intermediate developers, our concern is that,under some conditions, restrictions on financial flows may inadvertentlyincrease the stakes for holding on to power. A similar, but obviouslymore serious set of uncertainties affects the analysis of conflicts. In theory,if all parties to a conflict were blocked from accessing the outsideworld, this may have a positive effect in forcing them to recognize theexisting distribution of power and reaching a compromise more quicklythan otherwise. In the real world, a total sealing off is unlikely. Some partiesto the conflict are likely to be recognized by outside powers as legitimatewell before an internal political settlement has been arrived at andreceive financial and military assistance.Two entirely different outcomes may follow. The less likely is thatthe groups excluded by the international community recognize thehopelessness of their situation and either capitulate or agree to thesettlement that is offered. A more likely outcome, as in Afghanistan, isthat external assistance to help one side while attempting to blockresource flows to the other by declaring these to be unauthorized orillicit can increase the local legitimacy of the opposition and help tointensify the conflict. In the end, every group is likely to find someexternal allies and ways to funnel resources to fight a conflict where thestakes are high. Paradoxically, finding new foreign allies becomes easierif the enhanced legitimacy of the excluded side makes it more likelythat they will win. These considerations suggest that a neutral way ofdefining IFFs is particularly difficult, perhaps impossible, in the case offragile developers.Table 2.2 summarizes our analysis in this section.